Traders’ choice between limit and market orders: evidence from NYSE stocks |
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Authors: | Kee-Hong Bae Hasung Jang Kyung Suh Park |
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Institution: | School of Business Administration, Korea University, 5-1 Anam-dong, Sungbuk-ku, 136704, Seoul, South Korea |
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Abstract: | In this paper, we examine a trader's order choice between market and limit orders using a sample of orders submitted through NYSE SuperDot. We find that traders place more limit orders relative to market orders when: (1) the spread is large, (2) the order size is large, and (3) they expect high transitory price volatility. A rise in informational volatility appears neither to increase nor decrease the placement of limit orders. We also find that a rise in lagged price volatility decreases the size of spread, which is driven by the increase in the placement of limit orders. |
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Keywords: | Market orders Limit orders Trader's choice |
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